Danbury clean power manufacturer FuelCell Energy needs to quadruple its production if it is to lead an industry struggling to find a foothold in the renewable electricity world.

Once the company manufactures 210 megawatts of fuel cells annually, the cost of electricity generated by these power plants will be below the cost of the electric grid prices. At that point the fuel cell industry will no longer be dependent on government subsidies and companies willing to pay a premium for the benefit of clean, locally generated power.

"Fuel cells have to become commercial competitive over the long term without incentives," said Chip Bottone, president and chief executive officer of FuelCell.

As one of the companies that came first to the party, FuelCell will be poised to use its technology, acquired knowledge, and decade of hardships and uncertainty to lead once the industry graduates to the next level.

"What drives these installations is economics. What we really need to do it get prices below the electric grid," said Kurt Goddard, vice president of investor relations for FuelCell. "The more volume you can put through this plant, the more we can lower our costs."

FuelCell was founded in 1969 as an energy research company and produced its first commercial fuel cell in 2003. Today, the company is the top fuel cell power plant vendor in the world, followed closely by UTC Power of South Windsor, according to clean energy information firm Pike Research.

"That is one of the things that is unique about FuelCell Energy," said Thomas Lucas, senior manager for process engineering at FuelCell. "We took a risk, and now 10-15 years later, the production is catching up with the technology."

FuelCell, which has 500 employees, performs its research and development in Danbury, and its production facilities are in Torrington.

"This is an industry with global opportunities," said Joel Rinebold, director of energy initiatives at the Connecticut Center for Advanced Technology. "FuelCell is a company that has a very good future in Connecticut."

Despite its industry-leading status, FuelCell still struggles to become profitable, as the cost of production remains high. In 2011, the company suffered a $57.9 million annual loss to its shareholders, although that was an improvement over the $58.9 million suffered in 2010, the $71.9 million in 2009 and the $96.6 million in 2008.

"We certainly will be a profitable company. That is the top priority for us," Bottone said. "You can't run an industry that doesn't make any money."

Increased production will turn those numbers around, Goddard said. With more orders, the company can save on raw materials such as powdered nickel and stainless steel by buying in bulk, and increase its profit margin on every unit sold.

FuelCell currently produces 56 megawatts of power plants annually, up from 20 megawatts two years ago and 10 megawatts five years ago. Its Torrington facility can ramp up to 90 megawatts.

To achieve 210 megawatts, FuelCell's production facilities will have to be more geographically diverse, Bottone said. Ideally, the company wants to split its sales evenly between the Americas, Asia and Europe, and the company is working with partners in South Korea and Germany to handle increased production in addition to what comes out of Torrington.

The fuel cells produced in Torrington are very thin sheets of steel and other materials that run the process to create energy. FuelCell stacks these thin sheets to make power plants and can make a power plant of virtually any size. The sheets can be stacked on location or closer to the end user, so production can be ramped up in other countries rather quickly.

To increase demand for its products, the company relies on customers in locations with high electricity costs that value clean, locally produced energy, such as California, New England and the mid-Atlantic, Goddard said.

The company needs state subsidies to make the purchase of the fuel cells more cost effective for its customers, Goddard said. States such as Connecticut and California have solid programs in place, but the incentives are tough sells for legislatures in most states because they don't consider fuel cells to be as clean of technology as solar or wind power.

Fuel cells produce power through an electrochemical process where hydrogen crosses through an electrolyte to combine with oxygen. To obtain the hydrogen for the process, most FuelCell power plants use natural gas, although some use propane or biogas. There is no combustion, and the main waste product is water.

As opposed to solar and wind plants that generate power intermittently when there is sun or wind, fuel cells create electricity constantly, working as baseload generators.

FuelCell's products also capture the waste heat created during the electrochemical process to provide its customers with temperature necessary for hot water or heating and cooling.

Because incentives vary state-by-state and change from one year to the next, it is very difficult to get private investment for fuel cell installations, Bottone said. Having private financing would help increase demand drastically, but first the industry needs stability in its government incentives.

"We need to create a financing environment," Bottone said.

Fuel cells are ideal for companies that want to generate their own power onsite, or even for urban centers, Goddard said. This type of onsite is called distributed generation. A step further from that are microgrids, which is onsite power that can operate independently of the main electric grid.

Distributed generation and microgrids are ways to decentralize the country's centralized power system, which creates problems with large-scale power plants and transmitting electricity over long distances.

Since traditional large scale power plants typically receive government financing as part of the centralized grid, distributed generation should be afforded the same accommodation, Bottone said.

The low emission renewable energy contract, or LREC, program Connecticut put in place this year is a great example of incentives helping the industry achieve independence from subsidies, Bottone said. LRECs provide a steady source of revenue over a long-term contract, giving private investors the stability needed to finance fuel cell projects.

"Attraction of private capital is key to the industry," Bottone said.

FuelCell's best market right now is South Korea, where the country's government provides incentives for renewable power from fuel cells. FuelCell partnered with the subsidiary of an Asia steel company, Posco Power, to manufacture and distribute fuel cell power plants throughout the country. The two are working on expanding to other Asian countries, including Indonesia.

In Europe, FuelCell seeks to grow its presence as the continent shifts toward different sources of clean energy. The company partnered with German research firm Fraunhofer IKTS, particularly in Germany where the country seeks to decrease its reliance on nuclear power.

FuelCell markets its products to utilities as another source of generation, to universities looking for distributed generation, industrial companies with high electricity usage, and government agencies, along with several other niche customers.

"What we have is a technology that is really versatile," Goddard said.

The sales will get easier once the cost of fuel cell power is competitive – or even cheaper – than grid power. To achieve that, FuelCell needs to sell more of its products and ramp up its production.